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10 May, 04:09

Consider the following financial statement information for the Amaryliss Corporation: Item Beginning Ending Inventory $10,382 $11,180 Accounts receivable 5,651 6,181 Accounts payable 5,952 6,293 Net sales $139,303 Cost of goods sold 87,113 Assume all sales are on credit. Calculate the operating and cash cycles

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  1. 10 May, 04:37
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    60.67 days and 35.02 days

    Explanation:

    The computation of the operating and cash cycles is shown below:

    The operating cycle = Days inventory outstanding + days sale outstanding

    where,

    Day inventory outstanding = (Beginning inventory + ending inventory) : 2 : cost of goods sold * number of days in a year

    = ($10,382 + $11,180) : $87,113 * 365 days

    = ($10,782 : $87,113) * 365 days

    = 45.17 days

    Day sale outstanding = (Beginning Accounts receivable + ending Accounts receivable) : 2 : Net sales * number of days in a year

    = ($5,651 + $6,181) : 2 : $139,303 * 365 days

    = ($5,916 : $139,303) * 365 days

    = 15.50 days

    Now put these days to the above formula

    So, the days would equal to

    = 45.17 days + 15.50 days

    = 60.67 days

    Now The cash cycle = Days inventory outstanding + days sale outstanding - days payable outstanding

    where,

    Day payable outstanding = (Beginning Accounts payable + ending Accounts payable) : 2 : cost of goods sold * number of days in a year

    = ($5,952 + $6,293) : $87,113 * 365 days

    = ($6122.50 : $87,113) * 365 days

    = 25.65 days

    Now put these days to the above formula

    So, the days would equal to

    = 45.17 days + 15.50 days - 25.65 days

    = 35.02 days
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